President Joe Biden’s visit to Vietnam has been characterized as a significant effort to strengthen economic ties between the United States and Vietnam, aimed at reducing America’s dependency on China. This visit marks a crucial moment as the two former adversaries have upgraded their diplomatic ties to a “comprehensive strategic partnership,” a move with symbolic and substantial implications.
The strategic partnership signifies a deeper level of trust between the two nations as the United States seeks a reliable ally in Asia to navigate the complex political dynamics with China and pursue advancements in critical technologies, particularly in chip manufacturing.
Prominent companies like Apple and Intel have already expanded their operations in Vietnam to diversify their supply chains. This move has not only bolstered the Vietnamese economy but has also defied the global economic slowdown.
President Biden’s visit, following the G20 summit in India, holds historical significance as the first visit by a U.S. president to Vietnam since Donald Trump’s trip in 2019. During his visit, Biden engaged with Vietnamese General Secretary Nguyen Phu Trong and other leaders to promote technology-focused economic growth in Vietnam and discuss strategies for regional stability.
The growth in U.S.-Vietnam trade has been remarkable, with imports from Vietnam reaching nearly $127.5 billion in 2022, a substantial increase from previous years. In fact, Vietnam has ascended to become the eighth-largest trading partner of the United States, up from the tenth position just two years earlier.
One key aspect driving this partnership is the concept of “friend-shoring,” advocated by U.S. officials like Treasury Secretary Janet Yellen. Friend-shoring involves moving supply chains toward trusted allies to mitigate business vulnerabilities arising from geopolitical tensions. This strategy gained traction during the U.S.-China trade war, prompting companies to relocate manufacturing to emerging markets like Vietnam and India.
The repercussions of this shift could be significant for China, with the possibility of millions of jobs tied to exports being redirected elsewhere. As many as 300,000 low-tech manufacturing jobs may move from China to Vietnam alone.
Vietnam’s attractiveness as an industrial hub is driven by factors such as lower labor costs, a youthful population, and a robust consumer base. The nation’s early investment in supply chain capabilities across various sectors positions it favorably for attracting further investments.
Notably, the White House announced a new semiconductor partnership during President Biden’s visit, recognizing Vietnam’s potential to play a crucial role in bolstering resilient semiconductor supply chains. Intel, for instance, has committed $1.5 billion to establish its largest assembly and test facility near Ho Chi Minh City.
This partnership in the semiconductor industry aligns with the broader goals of both countries, as the U.S. seeks trusted allies to secure its chip supply, and Vietnam capitalizes on this opportunity.
While Vietnam’s rapid economic growth is projected to slow slightly due to reduced overseas demand for its exports, it still outpaces many major economies globally. This makes Vietnam an attractive prospect for corporations seeking bright spots in a challenging global environment.
Nevertheless, companies remain cautious due to concerns about Vietnamese tech regulations and infrastructure limitations. Despite these challenges, Vietnam emerges as a compelling alternative to manufacturing in China for various sectors, thanks to the presence of many Chinese suppliers who have relocated there.
In conclusion, President Biden’s visit to Vietnam and the elevation of U.S.-Vietnam diplomatic ties mark a significant step in reshaping supply chains, fostering technological collaboration, and strengthening regional stability. Vietnam’s role as a key partner in diversifying supply chains and advancing critical technologies is poised for further growth, benefiting both nations in this evolving economic landscape.
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